LDN - Business

Dollar dips, global stocks inch up ahead of Powell speech

[August 24, 2018] By Ritvik Carvalho

LONDON (Reuters) - The dollar dipped on Friday, set for its biggest weekly decline since March as markets braced for a speech by Federal Reserve chair Jerome Powell for hints on the direction of monetary policy, while a gauge of global stocks inched higher.

The MSCI All-Country World index <.MIWD00000PUS>, which tracks shares in 47 countries, was up by 0.1 percent. Shares in Europe rose, with the pan-European STOXX 600 index <.STOXX> up 0.2 percent on the day. [.EU]

Futures indicated Wall Street was set to open higher. <ESc1> [.N]

Against a basket of six major currencies, the dollar stood at 95.516 <.DXY>, down 0.3 percent on the day.

The U.S. currency took a hit this week after U.S. President Donald Trump said he was "not thrilled" with the Federal Reserve under his own appointee, Chairman Jerome Powell, for raising interest rates.

Analysts said growing U.S. political uncertainty, reinforced by the criminal conviction of one of Trump's ex-advisors this week, was keeping the dollar under pressure, despite the United States embarking on greater monetary tightening than elsewhere.

Another of Trump's former advisers has pleaded guilty to breaking campaign finance laws, bank fraud and tax evasion.

"In the current state of the U.S. political system, that is dominated by doubts in the system of checks and balances, remnants of U.S. dollar negativity remain," said Commerzbank analyst Ulrich Leuchtmann. [FRX/]

Powell is due to give a speech later in the day at the Jackson Hole, Wyoming, conference of central bankers. Where he stands on the pace of interest rate hikes will be scrutinized after minutes from the Fed's most recent policy meeting indicated the central bank would tighten monetary policy soon. Powell is due to speak at 1400 GMT.

The Fed should raise rates further this year and probably next year as well, despite Trump's opposition to tighter policy, Kansas City Fed President Esther George said in interviews aired on Thursday.

Dallas Fed President Robert Kaplan also said Trump's comments would not affect the central bank's decision making.

The dollar was 0.1 percent higher against the yen, at 111.360 yen per dollar. <JPY=> It was 0.4 percent lower to the euro at $1.15830. <EUR=>

Elsewhere in the group of G10 currencies, the Australian dollar was the biggest mover, gaining 0.6 percent on the day after the ruling Liberal party voted in a new leader.

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U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration/File Photo

Italian bond yields matched their highest level over Spain since 2012 as the economic and fiscal trajectories of the two countries diverge, and as investors ignored supportive comments for Italy from Trump. [GVD/EUR]

Europe's oil and gas stocks index <.SXEP> rose 0.7 percent on the day, after a government-appointed commission in Norway recommended the country's trillion-dollar sovereign wealth fund continue to invest in the sector.

TRADE TALKS END WITHOUT PROGRESS

Earlier in Asia, stocks fell after U.S.-China trade talks ended without any progress. MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> shed 0.1 percent.

Hong Kong's Hang Seng <.HSI> fell 0.43 percent and the Shanghai Composite Index <.SSEC> gained 0.2 percent.

Australian stocks <.AXJO> rose 0.05 percent and South Korea's KOSPI <.KS11> advanced half a percent. Japan's Nikkei <.N225> climbed 0.85 percent, lifted by a weaker yen.

The S&P 500 <.SPX> shed 0.17 percent overnight to pull back slightly from a record high scaled midweek, with industrial shares sagging after the United States and China imposed a fresh round of trade tariffs on each other.

Shares of industrial giants Caterpillar Inc CAT.N and Boeing Co BA.N, bellwethers of trade confidence, were among the biggest drags on the Dow <.DJI>, which lost about 0.3 percent. Caterpillar shares fell 2.0 percent, and Boeing shares fell 0.7 percent.

"Global risk sentiment remains somewhat jittery ahead of Fed Chair Powell's speech with U.S.-Sino trade talks failing to yield any immediate progress," strategists at OCBC Bank wrote.

Oil prices rose.[O/R] Brent crude futures rose over 1 percent to $75.60 per barrel <LCOc1>, while U.S. crude <CLc1> added 1.2 percent to $68.64.

(Reporting by Ritvik Carvalho; additional reporting by Tom Finn in LONDON and Shinichi Saoshiro in TOKYO; Editing by Raissa Kasolowsky

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